Chapter 4 Q & A
What is the difference between brand and advertising? Why is branding particularly important for online firms? What factors have contributed to Netflix's exceptional brand strength?
+Advertising can build awareness, but brands are built through customer experience. +Have a bad experience online and you're turned off by the firm's one and only virtual storefront. +They expect the firm to offer a huge selection, to be able to find what they want, for it to arrive on time, for all of this to occur with no-brainer ease of use and convenience, and at a fair price. Technology drives all of these capabilities, so tech is at the very center of the firm's brand building efforts.
How does Netflix use collaborative filtering to match movie titles with the customer's taste? What way does this software help Netflix garner sustainable competitive advantage?
+Cinematch develops a map of user ratings and steers you toward titles preferred by people with tastes that are most like yours = Collaborative filtering +Collaborative filtering technology has been continually refined, but even if this technology is copied, the true exploitable resource created and leveraged through this technology is the data asset.
What are some of the technologies that Netflix uses in its operations to reduce costs and deliver customer satisfaction and brand value?
+DVDs are fed into custom-built sorters that handle disc volume on the way in and the way out. That same machine fires off an e-mail as soon as it detects your DVD was safely returned (now rate it via Cinematch) +Scanners pick out incoming titles that are destined for other users and place these titles into a sorted outbound pile with a new, appropriately addressed red envelope.
Why did other firms find Netflix's market attractive? Why did many analysts incorrectly suspect that Netflix was doomed to fail? What have Blockbuster, Walmart, Hulu, Youtube and others done in response to the success of Netflix? What does this have to do with straddling and pureplays, CAS and RAS?
+Internet pure play without a storefront and with an overall customer base that seemed microscopic compared to these behemoths. Meaning cost were lower because of brick and mortar overhead costs. +NF is an Internet pure play without storefront Overall customer base was microscopic in comparison +In response Newcomers mimicked Netflix with cheaper rival efforts forcing Netflix to cut prices +Now Netflix is straddling because Hulu and Youtube are instant streaming only(no DVD). Internet pureplay more profitable. It's a CAS and Netflix has to use RAS in order to survive.
What are the various key issues facing streaming video models? What strategic moves has Netflix made in the last few year? Have those moves been successful? Why or why not?
+Netflix's shift to a streaming model (from atoms to bits) is limited by access to content and in methods to get this content to televisions. +Goal of Qwikster split was to improve both DVD and streaming services +Streaming is the future, but Netflix jumped the gun when separating Qwikster and Netflix.
What role do scale economies play in Netflix's strategies? How do these scale economies pose an entry barrier to potential competitors?
+Netflix's size = huge scale advantage Scale economies allow firms to Lower prices Spend more on customer acquisition, new features, or other efforts Established firms end up straddling online and brick and mortar markets +"Anyone can replicate the Netflix operations if they wish. It's not going to be easy. It's going to take a lot of time and a lot of money."
What is Netflix's business model? What are Netflix's sources of competitive advantage?
Chose a DVD-by-mail, Discs arrive in Mylar envelopes, After watching the video, consumers return by mail. OR instant streaming. Competitive advantage: +Innovative Business Process, +Superior IT: Operational Systems (order processing), Business Intelligence Systems (movie recommendations +Flexible Business Model
What was the downside of Netflix's early IPO?
Once Netflix was a public company, financial disclosure rules forced the firm to reveal that it was on a money-minting growth tear. Once the secret was out, rivals showed up.
How does the "long tail" concept relate to Netflix's ability to offer the customer a huge selection of movies?
The ability to serve large geographic areas through lower-cost inventory means Internet firms can provide access to the long tail of products, potentially earning profits from less popular titles that are unprofitable for physical retailers to offer. Traditional retailers lack shelf space
How is the concept of "atoms to bits" impacting a wide range of industries?
The shift from atoms to bits is impacting all media industries, particularly those relying on print, video, and music content. Content creators, middlemen, retailers, consumers, and consumer electronics firms are all impacted.
